In the climax of the movie, The Founder, about how Ray Kroc took McDonald’s from fast food innovator to major multi-billion dollar corporation, Harry Sonneborn advises Kroc, whose concentrating on how the burgers are made and struggling to make the franchises profitable, “You’re not in the hamburger business, you’re in the real estate business.” Title insurance underwriters will tell you they’re not in the real estate title information business, they’re in the title insurance business.
The 2016 ALTA commitment is very clear about this. The Notice, positioned prominently on top of the first page states, “This commitment is an offer one or more title insurance policies.” The next paragraph states, “This commitment is not an abstract or title report of the condition of title, or other representation of the status of title. The procedures used by the Company to determine insurability of the title, including any search and examination are proprietary to the Company, were performed solely for the benefit of the Company, and create no extracontractual liability to any person, including the proposed insured.”
The case law generally bears this out — that the commitment is not information about title, but an offer to insure title as stated in the commitment. Courts have ruled that a claiming insured is paid based on the insurance contract, not alleged negligence or other tort liability.
So far, this insurance contract arguably works well for both insurer and insured. Claims, and owner aggravation due to claims, are lowered by skilled title examining, and unavoidable latent claims and mistakes are covered by the insurance contract. But, what about the future when people come to expect a fully stocked information portal about their real estate purchase?
Will title insurance have its hamburger/real estate moment when it discovers it’s no longer in the insurance business, but in the real estate information business?
Companies, consumers, and law firms are increasingly data-driven. Lawyers are making decisions based on data that’s being collected about jury and judge behavior, and prior case settlements, and piecing together contracts from databases of provisions. Case analytics have become as important as case holdings and great judge quotes. Real estate lawyers have come to rely on form purchase and sale contracts, federally promulgated closing disclosures and settlement statements. Expectations for information to be at one’s fingertips are growing. In my earlier posts, I’ve described my thoughts on an ideal on-demand, integrated title and real estate information portal, and I don’t think any of it is beyond current expectations. Maybe it’s time for title insurance companies to start thinking about getting into the real estate data business.